Public Consultation on the Biofuels Obligation Scheme (2021-2030) - Calor Gas A champion for change in rural Ireland

Public Consultation on the
  Biofuels Obligation Scheme
          (2021-2030)

Calor Gas
A champion for change in rural Ireland

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Introduction
Calor welcomes the opportunity to respond to the consultation on the Biofuels Obligation Scheme for
the period 2021 to 2030, including the level of renewable energy in the transport sector in 2030 and
the introduction of an additional obligation for advanced biofuels.
Calor supports the Department’s policy measure, via the Biofuels Obligation Scheme, to increase the
share of renewable energy in the transport sector and to contribute to the reduction of Ireland’s
greenhouse gas emissions.
Calor has an important role to play in powering rural Ireland and providing innovative alternatives to
carbon-intensive fuels. Calor is devoting significant resources to product innovation and diversification
as part of the company’s decarbonisation strategy. Sustainability is at the heart of Calor’s business
strategy in Ireland. By 2037, Calor’s ambition is that all of its energy products will be from renewable
sources, the company’s centenary year. The company is over half way towards its ambition of 10%
renewable energy supply by 2020.
Calor is a part of the SHV Energy Group, the world’s largest distributor of LPG and one of the leading
suppliers of LNG for industries and transport in Europe. SHV Energy operates in more than 20 countries
and is proud to serve 30 million customers across three continents. The company has extensive
experience delivering low carbon gas technology for the transport sector in Europe.

Calor’s contribution to transport sector policy delivery
With responsibility for 20% of Irish emissions and as the third largest emitting sector, transport will
have a significant role to play in Ireland’s national decarbonisation agenda.
Ireland’s transport system is currently highly fossil fuel dependent, which results in significant
emissions of greenhouse gases (GHGs) and air pollutants that are contained in exhaust fumes.
According to the EPA, air pollutants released from transport are a key public health issue. The EPA has
highlighted that the transport sector accounted for 12% of all air pollutant emissions in 2015 and is
one of the largest contributors to particulate matter pollution in cities.
Calor acknowledges the importance of the government’s National Policy Framework on Alternative
Fuels Infrastructure for Transport in Ireland: 2017 to 2030, which outlines a long term vision for the
sector. Calor welcomes the Government’s strategy to reduce the sectors reliance on oil by
implementing policy measures that will encourage a switch to alternative fuels and technologies.
Calor can actively contribute to the government’s policy goal to further reduce carbon intensity and
increase renewable fuel use in the transport sector to 2030 and beyond. Liquified Natural Gas (LNG),
Liquified Petroleum Gas (LPG) and biofuels like BioLPG are lower carbon emission technologies,
proven as effective alternatives to petrol and diesel.

The role of biofuels and lower carbon fuels –LPG, BioLPG, LNG, BioLNG

LPG and BioLPG
Calor is the first company in Ireland supplying renewable fuel BioLPG to homes, businesses and
transport users. Its initial launch in April 2018 was as a fuel for heat, but we have since expanded the
range of applications for which BioLPG is being used. Calor has switched all of its 63 autogas stations
in Ireland to BioLPG. BioLPG is recognised and eligible for the Biofuels Obligation Scheme (BOS) under
the definition of ‘road transport’. In 2019, the BOS scheme was extended to include ‘non-road
transport’ widely used in Ireland through the fork lift truck sector. This sector currently uses diesel,
electric and LPG engines, with fossil diesel being the prominent choice of fuel.

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Some of Ireland’s largest businesses depend on LPG for their forklift operations, quickly moving goods
from storage to distribution. BioLPG offers even greater emissions benefits than conventional LPG,
particularly in relation to CO2 emissions. While the market in Ireland has been relatively small, LPG
for transport is a significantly larger market in Europe. With the availability of BioLPG, there is the
opportunity to switch non-road mobile machinery and commercial vehicles to a renewable fuel.
LPG and BioLPG powered forklifts offer Irish businesses unrivalled flexibility, offering the ability to
work safely both indoors and outdoors and without a requirement for electric charging. Switching
forklifts to BioLPG offers up to 32% lower emissions compared to conventional LPG and reduces fuel
running costs by up to 24% when switching from diesel. The current BioLPG option for fork lift trucks
offers a cost effective and affordable option to renewables.
With the recent inclusion of the fork lift truck sector in the Biofuels Obligation Scheme, the total
disposal of BioLPG on the market can increase to 1.8% of the total disposals in 2020, representing an
annual carbon saving of over 6,500 tonnes.
By supporting the development and adoption of renewable fuels like BioLPG, the government can
ensure a multi technology approach to addressing the transport decarbonisation challenge to 2030
and support the LPG industry’s ability to supply BioLPG from advanced feedstocks in the future.

LNG and BioLNG
Calor launched Ireland’s first Liquefied Natural Gas (LNG) product in Ireland in 2019, bringing the
economic and environmental benefits of natural gas to businesses off the natural gas network.

The new Aurivo milk drying facility in Roscommon, officially opened by Minister Creed, is the first
facility of its kind in Ireland to be powered by LNG. Calor LNG is a cleaner, lower carbon energy
solution that delivers for businesses located off the natural gas network. Calor LNG delivers a carbon
emission saving of 25% when compared to heavy fuel oil. LNG also delivers significantly lower
particulate emissions (-99%), NOx (-70%) and SOx (80%) – helping to improve air quality.

While Calor LNG is currently available to transition large industrial heat users from heavy fuel oil (e.g.
co-operatives, food processors, pharmaceutical companies, data centres), it can also be used for
transport. Calor and its parent company SHV Energy, brings extensive experience in low carbon gas
technology for the transport sector from Ireland, the UK and across Europe.
With rising fuel costs and increasing focus on reducing emissions, the transport industry is under
pressure to find alternative solutions.
Calor estimates that despite accounting for just 2-3% of Ireland's fleet, the heavy duty vehicle sector
contributes about 20% of transport emissions. Shifting from diesel to LNG for transport could cut
carbon emissions by 20%.
For decades diesel has been the default option for vehicle fleets, and heavy goods vehicles in
particular, contributing substantially to harmful transport emissions. With the advent of commercial
vehicles powered by LNG, that is changing. Mainstream manufacturers including Volvo, Scania and
Iveco now offer a choice of LNG-powered trucks that have comparable performance to diesel vehicles
in terms of power, acceleration, and cruising speed.
Diesel fuel contains more energy per litre than petrol and coupled with the fact that diesel engines
are more efficient than petrol engines, diesel cars are more efficient to run. Diesel fuel contains no
lead and emissions of the regulated pollutants (carbon monoxide, hydrocarbons and nitrogen oxides)
are lower than those from petrol cars without a catalyst. However, when compared to petrol cars with
a catalyst, diesels have higher emissions of NOx and much higher emissions of particulate matter.

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LNG is better than any other fossil fuel for the environment. The combustion of natural gas releases
significantly less CO2, NOx and SOx and virtually no ash or particulates. And as it evaporates rapidly
when exposed to the air, it leaves no residue on water or soil.
LNG also powers large vehicles more efficiently than electricity, offering better ranges and lower
maintenance requirements.
LNG stations can be implemented relatively quickly, in partnership with existing forecourt providers
and do not require connections to the existing gas network. Once LNG stations are established in
Ireland, the seamless transition to BioLNG will be a step away.
In addition to environmental benefits, LNG is significantly cheaper than diesel, even more so when the
externality of carbon cost is accounted for. LNG is far simpler and more economical to produce than
any other fossil fuel. Its price is more stable compared to other fuels, enabling businesses to forecast
energy costs more accurately.
The process of cooling natural gas into a liquid form shrinks the volume so that it takes up around 600
times less space than when in its gaseous form. And it weighs even less than water. This makes it
easier and cheaper to transport and store. LNG therefore has the benefit of being available anywhere
in Ireland, meaning that rural haulage and fleet operators can play their part in the decarbonisation
of their fleet and make a significant contribution to the country’s 2030 transport emissions targets.
The introduction of LNG in the Irish transport sector would further enhance Ireland’s diversity of
energy supply and make a significant contribution to greenhouse emission reductions and air quality
improvements in urban and rural areas.
In 2018 there were 4,000 HGVs operating on LNG on the roads of Europe and 955 of these vehicles
are in France, Italy, Benelux and the UK to date. This number is expected to grow to 30,000 by 2023.
The successful roll out of LNG in Europe has been based on a collaborative approach between policy
makers, vehicle manufacturers, energy companies, forecourt operators and customers. Barriers to
adoption have been identified and where possible steps have been taken to promote adoption, with
policy solutions provided by Government.
Transitioning to gas propelled technology will make a significant contribution to Ireland’s efforts to
reduce carbon and cut pollutants but it requires clear policy interventions to incentivise a move from
petrol and diesel and to support investment in infrastructure delivery, in order to encourage freight
companies and hauliers to invest in the technology, without compromising their operational
efficiency.
The adoption of LNG as a lower carbon fuel opens the possibility to introduce renewable BioLNG in
the future. BioLNG is biomethane which is liquefied in the same process as LNG, it emits negligible
NOx or particulate matters when burned and reduces CO2 by up to 90%. Once LNG is established in
Ireland, the transition to BioLNG will be seamless.
Calor welcomes the commitment by the government’s Low Emissions Vehicle Taskforce to support
the early transition to alternative fuels by maintaining and building upon existing tax and financial
incentives and consideration of further polices and measures to support the uptake of low emission
vehicles. The industry awaits the outcome of the Taskforce’ review of the role of alternative fuels for
transport

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Consultation Questions Relating to the Biofuel Obligation

Question 1
The Climate Action Plan has identified that blending levels of 10% by volume in petrol and 12% by
volume in diesel on average must be achieved by 2030 in order to contribute to meeting Ireland’s
emission reduction target.
The recast Renewable Energy Directive sets out a target of at least 14% renewable energy in transport
sector by 2030. These blending levels, together with the expected growth in electric vehicles, will
ensure that the 14% target is achieved.
It is intended that the biofuel obligation rate in the Biofuels Obligation Scheme will increase every two
years (i.e. in 2022, 2024, 2026, 2028 and 2030). It is intended that the increases will ensure a relatively
linear increase in the level of renewable energy used in the transport sector.
Relevant section of the recast Renewable Energy Directive: Article 25(1)
(a) Do you consider these blending levels to be a suitable balance of feasibility and ambition?

(b) Do you consider the approach to increasing the biofuel obligation rate appropriate?

Calor’s BioLPG can be blended up to 100% and can continue to make a significant contribution to the
Biofuels Obligation Scheme targets for 2030, in particular in “non-road transport’ widely used in
Ireland through the fork lift truck sector. Calor agrees that a clear biofuels obligation rate increase
trajectory is required to ensure the required levels of renewable energy used in the transport sector
are delivered.

Question 2 (a to f)
Increasing the biofuel obligation rate is likely to involve the introduction of fuels with higher
concentrations of biofuel (such as petrol blended with 10% bioethanol and diesel blended with 12%
biodiesel on average).

This may lead to compatibility issues with older vehicles, additional cost to the consumer, the
necessity to inform consumers in order to ease its introduction, and potentially a need to develop
forecourt infrastructure.

(a) What do you view as the technical and consumer challenges associated with a blending level of
10% by volume in petrol on average?

(b) What do you view as the technical and consumer challenges associated with a blending level of
12% by volume in diesel on average?

(c) What types of biofuel would you expect to be used to meet these increased blending levels?

(d) Are such fuels available in sufficient quantities to meet the needs of the Irish market?

(e) What actions are needed (outside of the Biofuels Obligation Scheme) to support the increase in
blending levels (e.g. consumer communication)?

(f) What is the expected cost to consumers associated with increasing the blending levels?

Please refer to Question 1 above.

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Question 3
The recast Renewable Energy Directive sets out that obligation schemes may operate on a volume,
energy or greenhouse gas emissions basis. In order to better align the Biofuels Obligation Scheme with
the recast Renewable Energy Directive (where targets, limits etc. are based on energy) and to ensure
the operation of the scheme is not overly complex, it is intended to move from a volume-based
obligation to an energy-based obligation.

The amount of fossil-based energy placed on the market in the transport sector by an obligated party
(see below) will be multiplied by the biofuel obligation rate to determine the level of biofuel that must
also be placed on the market.

When biofuel is placed on the market, a credit for the level of energy is created. Currently this takes
the form of a certificate. When the scheme converts to an energy basis, it is proposed that this will
take the form of a level of energy. The energy that is credited will be tradable between obligated
parties as is currently the case.

Relevant section of the recast Renewable Energy Directive: Article 25(1)

(a) Do you consider the move to an energy-based obligation appropriate?

Calor supports the move to an energy based obligation based on the reasoning for alignment with the
recast Renewable Energy Directive. However, the energy content per volume of biofuel is important
here, we acknowledge Annex III in the recast Renewable Energy Directive provides the default values
to be used by the Member State.

In line with amendments of Annex III, the new scheme should adopt any updates on the default values.
An increase in the biofuel quality in the future will result in higher calorific values, the flexibility to
recognise this is requested.

Question 4
The recast Renewable Energy Directive must be transposed into law by mid-2021. It is planned to
develop and implement the necessary legislative changes in advance of the deadline.

It is important to provide certainty to fuel suppliers to allow them prepare for the changes including
sourcing supplies of biofuel. It is also intended to continue to operate on a calendar year basis.

It is therefore intended that the Biofuels Obligation Scheme would continue to operate in its current
form until the end of 2021 and the changes set out in this consultation would take place from the
beginning of 2022.

It should be noted that some minor changes (such as the reduction of carryover to 15% in 2020) will
take place in the period prior to 2022.

(a) Do you consider the timing of changes to the Biofuels Obligation Scheme appropriate?

Calor agrees in principle to the proposed timeline for the implementation of changes set out in the
consultation to allow certainty to fuel suppliers. However, Calor does not consider the timing of
changes in relation to the approach to biofuels produced from feedstocks that are considered a high
risk (from indirect land use change perspective) appropriate and has set out its response and reasoning
under Question 10.

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Consultation Questions Relating to the Advanced Biofuel Obligation (including
Biomethane)

Question 5
The recast Renewable Energy Directive sets out a target of at least 0.2% renewable energy in transport
sector to come from advanced biofuels in 2022, increasing to 1% in 2025 and 3.5% in 2030.

It is intended to create a secondary obligation for advanced biofuels. This will operate similar to the
biofuel obligation. The amount of energy placed on the market in the transport sector by an obligated
party (see below) will be multiplied by the advanced biofuel obligation rate to determine the level of
advanced biofuel that must also be placed on the market.

The advanced biofuel obligation will be a sub-obligation and therefore advanced biofuels will
contribute to meeting both the advanced biofuel obligation and the biofuel obligation.

When advanced biofuel is placed on the market, a credit for the level of energy is created. This will be
recorded separately and will contribute to meeting both the biofuel obligation and the advanced
biofuel obligation. This energy will also be tradable between obligated parties.

The increases in the advanced biofuel obligation rate will be as set out in the recast Renewable Energy
Directive – i.e. 0.2% from 2022, increasing to 1% in 2025 and 3.5% in 2030.

The implementation of an advanced biofuel obligation is considered a key incentive for the
introduction of biomethane as a fuel in the transport sector. This could lead to the production of
biomethane from relevant feedstocks (such as the biomass fraction of mixed municipal waste and
animal manure) and its use in CNG/LNG vehicles. Meeting the advanced biofuel obligation in this way
would provide a market support for the introduction and use of biomethane in the transport sector.

Relevant section of the recast Renewable Energy Directive: Article 25(1); Part A of Annex IX

    (a) Do you consider the approach to introducing an advanced biofuel obligation appropriate?
An advanced biofuel obligation as a key incentive to promote research and innovation in this field is
welcomed. The obligation rate should be based on a feasibility analysis of what is available in the
global biofuels market, which will change dramatically within the next ten years. Ireland is currently
importing a large percentage of biofuels and this is unlikely to change within 5 years by 2025, when
the first increase is proposed. A data and statistics led proposal is recommended, taking account of
future biofuel alternatives, in addition to biomethane. Calor is happy to support feasibility analysis
input, working with the SHV Energy Biofuels team.

(b) What biofuels do you envisage contributing to meeting this obligation?

As a global decentralised energy supplier, Calor’s parent, SHV Energy, welcomes and supports
sustainable, high quality and safe renewable gas initiatives; particularly those that provide cleaner,
lower carbon energy for consumers living or working beyond the natural gas grid.

SHV Energy is currently developing a strong pipeline of new opportunities in order to continually
expand its ability to supply sustainable BioLPG to its customers across Europe.

The use of renewable and low carbon feedstocks such as biomass, agricultural, residential and
industrial waste products are regarded as key opportunities for the SHV Energy group.

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SHV Energy works with feedstock providers, technology suppliers and policy makers to ensure that
bio-based gas innovation continues to prosper. Our selected technology and product providers will
demonstrate their commitment to increasingly sustainable feedstocks as well as complying with
officially recognised ethical and land use criteria.

SHV Energy has pioneered the global introduction of BioLPG (biopropane). SHV Energy has worked
with Finnish biofuels producer Neste to develop the supply of biopropane into Ireland, the UK and
other European markets. This biopropane is a by-product of a conventional hydrogenation process
that mainly produces ‘renewable’ biodiesel. We continue to research and identify new ways to
produce biopropane and Advanced Conversion Technologies (ACT’s) are regarded as a credible route
to high volumes of liquid biofuels. This is because they are the only way to process high volume
feedstocks – namely residual waste, wood waste, dedicated energy crops, crop residues and
agriculture residues.

In May 2019, SHV Energy, KLM and SkyNRG announced plans to build the first European sustainable
aviation fuel (SAF) production facility in Delfzijl in the Netherlands. By 2022, the plant will produce
100,000 tonnes of SAF in addition to 15,000 tonnes of BioLPG as a by-product. In November 2019, SHV
Energy announced its participation in the KLM Corporate Biofuel Programme which supports SHV
Energy’s strategic decision to actively contribute to the development and production of sustainable
energy products.

A 2018 report by the World LPG Association and Atlantic Consulting “BioLPG: The Renewable Future”
surveys the markets, feedstocks, process technologies, projects and environmental impacts for
BioLPG.

A September 2019 report was launched by Liquid Gas UK on “Biopropane: Feedstocks, Feasibility and
our Future Pathway” in conjunction with NNFCC, a leading international consultancy with expertise
on the conversion of biomass to bioenergy, biofuels and biobased products.

There are several biomass-to-energy conversion processes in which BioLPG is produced as a co-
product and there are a range of biomass feedstocks that can be used in those processes. These range
from the hydro treating of vegetable oil to produce HVO biodiesel to the production of synthetic fuels
through gasification, pyrolysis, Fischer-Tropsch and methanol-to-gasoline. Currently, the primary
production route for biopropane is as a co-product of HVO biodiesel where the process yields are in
the range of 5-8%. Due to the large amounts of HVO biodiesel produced, significant volumes of
biopropane can be obtained, despite the yields being fairly low.

In terms of advanced feedstocks, there are also novel processes whereby biopropane can be produced
as the main target product. These include the use of specialised microbes to ferment organic wastes
to produce biopropane (rather than biomethane), and also the direct synthesis of propane from the
syngas produced from the gasification of woody biomass.

According to the 2018 WLPGA report, the highest-volume feedstock, by far, is cellulosics – residues
from agriculture and forestry plus on-purpose energy crops. Another significant feedstock could be
municipal waste. Its volumes are smaller and the technology more complex, but waste is readily
available.

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Figure 13 Extract, Page 31, Biopropane: Feedstocks, Feasibility and our Future Pathway, Prepared for
Liquid Gas UK, September 2019

Research into the possibilities of advanced chemical processing and using the advanced feedstocks set
out are at an early stage. They are, however, real possibilities recognised by numerous sources of
research studies (available on request). The early stage maturity of advanced feedstocks is not only a
challenge for BioLPG but across transport fuels.

Calor is calling on the government to support the research, development and adoption of biofuels
such as BioLPG which are currently making an active contribution to the decarbonisation of Ireland’s
transport sector in order to support the LPG industry’s ability to supply BioLPG from advanced
feedstocks in the medium term.

Calor also regards LNG as a key transition fuel to BioLNG, a potential biofuel capable of being produced
from advanced feedstocks set out in Part A of Annex IX of the recast Renewable Energy Directive. The
exemption of LNG from the biofuels obligation as proposed in Question 7, is an essential tool to ensure
that the LNG market develops so that a seamless transition can be made to BioLNG produced from
advanced feedstocks.

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Consultation Questions Relating to Obligated Parties

Question 6
The recast Renewable Energy Directive sets out that the target for renewable energy use in the
transport sector includes road and rail transport. Currently, under the Biofuels Obligation Scheme, the
obligation only applies to road transport. In order to align the scheme with the recast Renewable
Energy Directive, it is intended to extend the scope of the obligation to include rail transport.

Relevant section of the recast Renewable Energy Directive: Article 27(1)(a)

(a) Do you consider the approach to include both the road and rail transport as obligated parties
appropriate?

Calor supports the move to include both road and rail transport under the obligation based on the
reasoning for alignment with the recast Renewable Energy Directive.

Question 7
The recast Renewable Energy Directive provides for Member States to exempt, or distinguish
between, different fuel suppliers and different energy carriers when setting the obligation on the fuel
suppliers, ensuring that the varying degrees of maturity and the cost of different technologies are
taken into account. Members States may also exempt fuel suppliers in the form of electricity or
renewable liquid and gaseous transport fuels of non-biological origin (e.g. hydrogen produced from
renewable electricity) from the advanced biofuel obligation.

It is intended, in order to incentivise the use of alternative fuels, to apply a reduced or zero obligation
to specific fuels. This means there would be no, or a reduced, biofuel obligation and advanced biofuel
obligation on specific fuels.

It is intended to categorise fuels as follows:

• No obligation: CNG, LNG, hydrogen, electricity

• Half obligation (i.e. an obligation is generated based on half the energy content of fuels placed on
the market): No fuels

• Full obligation: All other fossil-based transport fuels

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As technologies mature and costs reduce, fuels may have the level of obligation increased.

Relevant section of the recast Renewable Energy Directive: Article 25(1)

(a) Do you consider the approach to exempting certain fuels from the obligation to be appropriate?

Calor recognises and supports the exemption of alternative transport fuels, however notes that LPG
has been omitted from the suggested no obligation fuels.

Under the 2014/94/EU Directive for the deployment of alternative fuels infrastructure, Liquefied
Petroleum Gas (LPG) was identified as a principal alternative fuel with a potential for long-term oil
substitution, also in light of its possible simultaneous and combined use by means of, for instance,
dual-fuel technology systems.

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As LPG is classified under the same definition in 2014/94/EU Article 2, it is requested that LPG is
classified under the same conditions as CNG, LNG, hydrogen, electricity, with no obligation under the
new Biofuel Obligation Scheme.

As set out in Question 5, both BioLPG and BioLNG have the potential to be produced using advanced
feedstocks. In order to support this transition, LPG should be included as a principal alternative fuel
alongside LNG.

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Consultation Questions Relating to Meeting the Obligation

Question 8
The Biofuels Obligation Scheme currently operates by issuing certificates in respect of volumes of
biofuel which are placed on the market. For each calendar year, an obligated party must hold sufficient
biofuel obligation certificates to demonstrate compliance.

As set out above, it is intended to amend the scheme to operate on an energy basis. In place of issuing
certificates, a credit will be provided corresponding to the level of renewable energy placed on the
market. Each credit of energy will be categorised as one of the following based on the feedstock it was
produced from:

• Advanced biofuel (Annex IX Part A)

• Used cooking oil and animal fats (Annex IX Part B)

• Food and feed crops

• All other

As biofuel (or biogas) is placed on the market, the total level of energy credited to each obligated party
(or other entity that places such fuels on the market) will increase in the relevant category. Sufficient
balances will be required across all four categories to meet the biofuel obligation and in the first
category to meet the advanced biofuel obligation.

It should be noted that although some fuels may not generate an obligation (e.g. CNG, LNG etc.),
suppliers who are placing biofuels (or biogas) on the market for use by such vehicles will be credited
under the Biofuels Obligation Scheme.

To incentivise the use of renewable transport fuels in aviation and maritime, it is intended to credit
biofuels supplied for use in the aviation and maritime sector.

To incentivise the use of alternative fuels, it is intended that renewable fuels of non-biological origin
(including renewable hydrogen) and recycled carbon fuels will also be eligible for energy credits.

As the supply of electricity for suppliers will not generate an obligation and the measurement of such
supplies would create a significant administrative burden, it is not intended to be obligated parties, it
is not intended to provide any energy credit for the supply of renewable electricity to road or rail
transport.

Relevant section of the recast Renewable Energy Directive: Article 25(1)

(b) Do you consider the approach to issuing energy credits appropriate?

Calor supports the approach to issue energy credits, it encourages non-obligated parties to supply
sustainable renewable biofuels into the transport market.

The Department should avoid putting in place barriers to prevent innovation and future solutions and
should ensure that all options are open to support Ireland meeting its challenging 2030 targets. This
principle is previously mentioned in relation to BioLPG and feedstocks. It is also applicable to other
recognised biofuels and sectors under the recast Renewable Energy Directive.

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Question 9
The recast Renewable Energy Directive sets out that multipliers can be applied to biofuels produced
from specific feedstocks. Multipliers can also be applied to renewable electricity supplied to road and
rail transport when calculating compliance with the recast Renewable Energy Directive.

The multipliers allow biofuel from specific feedstock to be preferred. They also allow adjustment for
the greater efficiency of electric road and rail vehicles compared to fossil fuel equivalents. There may
be an increased risk of fraud in the market in assigning multipliers to biofuels from specific feedstock
which needs to be considered.

It is considered appropriate that biofuels (and biogas) for transport produced from feedstock listed in
Annex IX of the recast Renewable Energy Directive (i.e. advanced biofuels and those produced from
used cooking oil and animal fats) shall be considered to be two times their energy content. This is
intended to apply when credit is provided in the Biofuels Obligation Scheme and when calculating
compliance with the recast Renewable Energy Directive.

It is intended that, with the exception of fuels produced from food and feed crops, biofuels supplied
for use in the aviation and maritime sectors shall be considered to be 1.2 times their energy content.
Where such fuels are produced from feedstock listed in Annex IX, the 2 times multiplier shall also
apply (i.e. a 2.4 times multiplier would apply). This is intended to apply when credit is provided in the
Biofuels Obligation Scheme and when calculating compliance with the recast Renewable Energy
Directive.

It is intended to apply a multiplier of 4 times and 1.5 times the energy content for renewable electricity
supplied to road and rail transport respectively when calculating compliance with the recast
Renewable Energy Directive.

Relevant section of the recast Renewable Energy Directive: Article 27(2)

(a) Do you consider the approach to applying multipliers to be appropriate?
(b) Do you consider the approach to applying multipliers impacts the risk of fraud?

Calor would prefer to see the creation of actual biofuel volumes, without the use of multipliers.
However it acknowledges these multipliers are required for non-obligated sectors like aviation to
make viable investment and business models.

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Consultation Questions Relating to Limits on Specific Biofuels

Question 10
Under the recast Renewable Energy Directive and the subsequent delegated act23, biofuel produced
from palm oil is classed as being high risk from an indirect land use change perspective. Further
feedstocks may be similarly classed in future.

Until 2023, Member States should not exceed the level of consumption in 2019 of any biofuels
considered to be high risk. From 31 December 2023 until 31 December 2030 at the latest, the limit is
to be gradually decreased to 0%.

Given Ireland has very limited use of biofuels produced from palm oil and the impacts in relation to
indirect land use change, it is intended that a limit of 0% will be implemented for all biofuels
considered to be high risk from an indirect land use change perspective.

While it will still be permitted to supply these biofuels, no credit will be given in the Biofuels Obligation
Scheme and therefore there will be no incentive for suppliers to provide such fuels.

It is proposed that this limit would take effect from 2022 along with the other intended changes to
the Biofuels Obligation Scheme.

Relevant section of the recast Renewable Energy Directive: Article 26(2)

(a) Do you consider the approach to biofuels produced from feedstocks that are considered a high
risk (from indirect land use change perspective) appropriate?

Calor has serious concerns about the proposal to introduce an early limit of 0% on biofuels considered
to be high risk from an indirect land use change perspective, notably palm oil. In the context of
developments at EU level and the delegated legislation adopted by the Commission on 13 March 2019
versus the position set out in the BOS consultation, Calor questions the 2022 proposal versus the EU
position of a gradual phase out by 2030, starting in 2023. The EU decided not to terminate policy
support to biodiesel after 2020, but gradually to phase out support to high emitting biofuels by 2030.

The proposal for a 100% phase out by 2022 will have a serious impact on the ability to continue to
contribute to Ireland’s transport emission targets and the vital transition to advanced biofuel
feedstocks in the medium term. In particular, the proposal would have a detrimental impact on
security of supply and the ability to offer consumers fossil alternatives at competitive prices.

Europe is currently the largest biodiesel producer and consumer in the world and the region’s use of
biodiesel in the transportation sector has expanded rapidly since the 1990s. After rapeseed oil and
used cooking oil (UCO), palm oil is the third most important feedstock in current European biodiesel
production. With the palm oil phase out, Europe will see both a change in the source of biodiesel
imports and the feedstock used to produce biodiesel. Already, the EU is increasingly turning to imports
from China, where UCO is a key feedstock. China’s biodiesel exports to the EU increased by more than
70% to reach 311,000 tonnes during the first eight months of 2019. The EU is also importing more
UCO from other countries in Asia such as Japan.

Calor’s BioLPG is by-product of the Hydrotreated Vegetable Oil (HVO) process. BioLPG is made in a
manner which is consistent with best practice for sustainable land use in accordance with European
guidance. Importantly, it is certified in this regard. Produced by NESTE, a specialist in advanced
biofuels, at a custom-built refinery in Rotterdam, feedstocks, including palm oil, are sourced from
producers certified by the Roundtable on Sustainable Palm Oil (RPSO), meaning they act in accordance

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with standards on labour standards, biodiversity conservation, land use change, pollution and more.
BioLPG is also ISCC certified, a global standard to warrant the origin and sustainability of the feedstock.
BioLPG is approved by the UK government as a sustainable renewable fuel and more recently by the
Irish Government. Since the launch of BioLPG, 25 new facilities are in the planning stages for the
production of BioLPG globally.

The contribution made by Calor’s BioLPG to the transport market and targets will increase in the
coming years since its introduction in 2018. The BOS 2018 annual report shows BioLPG accounted for
0.2% of the total biofuel volume placed on the market, representing six months’ supply across our
autogas forecourts.

In 2019, with the inclusion of the fork lift sector in the BOS scheme, Calor’s contribution is forecast to
increase to 0.8% of biofuel volume placed on the market. A greater volume contribution in 2020 is
expected with further growth in the fork lift transport market. Provided BioLPG remains a viable and
cost effective transport solution, the total disposal of BioLPG on the market will increase to 1.8% in
2020, representing an annual carbon saving of over 6,500 tonnes. Calor is committed to continuing to
contribute to Ireland’s transport targets, ensuring a viable alternative to LPG and the ability to reduce
carbon emissions by up to 90%.

Calor is devoting significant resources to product innovation and diversification as part of the
company’s decarbonisation strategy. Sustainability is at the heart of Calor’s business strategy in
Ireland. By 2037, Calor’s ambition is that all of its energy products will be from renewable sources, the
company’s centenary year. The company is over half way towards its ambition of 10% renewable
energy supply by 2020.

Calor estimates that it needs 5 to 10 years to source BioLPG from non-palm oil HVO in Ireland. Calor’s
parent SHV Energy has a dedicated Biofuels team whose main goal is to secure sustainable sources of
supply for the production of BioLPG. This ambition involves a vertical integration strategy with
producers to gain more control of the BioLPG supply-chain. For example, together with KLM and
SkyNRG, SHV Energy will invest in a new plant for sustainable aviation fuel (SAF) that will be developed
by SkyNRG. SHV Energy will purchase the BioLPG that is produced. This is the first dedicated plant for
the production of SAF in Europe, which will be located in the Netherlands. It will specialise in producing
SAF, BioLPG and naphtha, primarily using regional waste and residue streams as feedstock. Apart from
hydrogenation, ten other conversion technologies have been short-listed to source non-palm-oil-
based BioLPG. These multiple production pathways include for instance the use of solid biomass and
gasification of domestic or commercial municipal waste. However, these conversion technologies are
still in pilot phase, and time is needed to develop these industrial processes at scale with affordable
energy prices.

SHV Energy is currently investing significant funding with global research partners. One such highly
promising and novel route has resulted from a joint-cooperation between research partners located
in the Republic of Ireland and Northern Ireland.

Calor seeks alignment with the EU position in order to mature, alongside the EU biodiesel market, to
advanced biofuel feedstocks in the medium term and to ensure stability and competitive prices for
consumers in the transport and heat sectors as we strive to reach our 100% decarbonisation goal by
2037.

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Question 11
The recast Renewable Energy Directive includes a limit on biofuels produced from food and feed crops.
The maximum limit in energy terms which is likely to apply for Ireland for these biofuels is 2% based
on current use of these biofuels.

The majority of biofuel currently supplied to petrol vehicles is produced from food and feed crops. It
is intended that the level of biofuel use in petrol vehicles would double from 5% to 10% and therefore
it is intended to set the limit at 2% to provide for this growth.

As the limit set will be five percentage points less than the maximum of 7%, the overall target that
applies to Ireland of 14% will reduce to 9%. This reduction only applies when measuring compliance
with the recast Renewable Energy Directive. As set out above, the obligation will be set to ensure the
overall 14% target is achieved.

When a biofuel produced from food and feed crops is placed on the market, a credit for the level of
energy is created. This will be recorded separately to other biofuels or advanced biofuels. While this
energy will contribute to meeting the biofuel obligation, it will be limited to 2% of the energy placed
on the market (i.e. the energy used to calculate the obligation).

The energy credit for biofuel produced from food and feed crops will be tradable between obligated
parties. However, the classification will remain and it will be counted within the 2% limit for the
purchaser of the credit.

Relevant section of the recast Renewable Energy Directive: Article 26(1)

    (a) Do you consider the approach to biofuels produced from food and feed crops appropriate?

Calor acknowledges the benefits of setting the limit for food and feed crops at 2%. However in order
for BioLPG to remain a contributor to the scheme it is requested that sustainably sourced and certified
high risk feedstocks (from indirect land use change perspective) are included in the list of acceptable
food and feed crops under this 2% limit. The case for aligning with the European phase out of high risk
feedstocks is set out in full under Question 10.

Question 12
The recast Renewable Energy Directive includes a 1.7% limit on biofuels produced used cooking oil
(UCO) and animal fats that can be counted for compliance with the target of at least 14% renewable
energy in transport sector by 2030. A multiplier of 2 can apply to such biofuels (see below) which
would lead to a maximum contribution of 3.4% towards the target of 14%.

It should be noted that the recast Renewable Energy Directive does not appear to place any restriction
on the contribution such biofuels can make to the overall level of renewable energy in Ireland or
emission reduction from the transport sector.

As set out above, Ireland can comply with the transport sector target in the recast Renewable Energy
Directive by achieving a level of 9% by 2030. Advanced biofuels are expected to contribute 1.75% on
an energy basis (equivalent to 3.5% with a multiplier of 2 applied), biofuels from food and feed crops
could contribute up to 2%, and UCO and animal fats could contribute up to 1.7% (equivalent to 3.4%
with a multiplier of 2 applied). That would lead to 8.9% of the 9% target before electric vehicles and
electric rail are counted.

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Given the restriction only applies to the transport sector target, how such a limit will be included in
the Biofuels Obligation Scheme will need to be considered carefully.

In addition, Member States (where justified) can modify the 1.7% limit taking into account the
availability of feedstock. Any such modification shall be subject to the approval of the European
Commission.

In 2018, of the 216 million litres of biofuels placed on the Irish market, 162 million litres were biodiesel
produced from UCO or animal fats. This represented over 3% in energy terms of the energy used in
the transport sector in 2018 and thus is in excess of the 1.7% limit.

Given the level of biofuel used from these feedstocks in Ireland, consideration is being given to seeking
the European Commission’s approval for a higher limit. Such a request to the European Commission
would need to be evidence-based and focus on the availability of feedstock.

Relevant section of the recast Renewable Energy Directive: Article 27(1)(b)

    (a) What approach do you think should be adopted in relation to the 1.7% limit on biofuels
        produced from UCO and animal fats?

Ireland’s prominent feedstock is used cooking oils, with a limit on food and feed crops also imposed.
A limited supply of feedstocks will increase the cost of fuel to consumers in road transport.

Used cooking oil and animals fats are available and will be used to replace feed and food crops in HVO
technologies to produce HVO biodiesel and BioLPG. This is the main source of liquid biofuels globally.

An analysis of what the surplus used cooking oils and animal fats would be used for instead is
recommended. This could have an indirect impact on the agriculture sector, currently animal fats are
sold to the biofuels industry at a high value. A restriction may reduce the overall business models for
the Irish agriculture sector.

    (b) Do you consider it appropriate to seek the European Commission’s approval for a higher
        limit and, if so, what evidence would you suggest be used to support such a request?

Calor is not currently able to source BioLPG made from Used Cooking Oils at a cost effective and
affordable rate for Irish consumers in the transport and heat sectors. Consequently, we are not
currently in a position to advice on what figures to appoint to a higher limit. As mentioned in 12.a)
an analysis of what the surplus used cooking oils and animal fats would be used for instead is
recommended.

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Consultation Questions Relating to the Carryover of Credits

Question 13
The Biofuels Obligation Scheme allows for up to 25% of the obligation in any one year to be met using
certificates carried over from either of the previous two years. This limit is in the process of being
reduced to 15% from 2020.

It is intended to retain this carryover system in order to provide suppliers with a level of

24 The biofuels are listed in Part B of Annex IX in the recast Renewable Energy Directive; animal fats
are classified as categories 1 and 2 in accordance with Regulation (EC) No 1069/2009 flexibility, and
support the creation of new supplies of biofuels. However, changes will be necessary due to the
intention to move from a volume-based obligation to an energy-based obligation. The introduction of
a target for advanced biofuels and limits on biofuels produced from food and feed crops will need to
be catered for.

It is intended that where an obligated party has, after trades with other parties, an excess credit of
energy over and above the level required to meet its obligation, it can be transferred to the following
year provided that:

• the excess credit of energy does not include any energy in excess of the 2% limit on biofuels
produced from food or feed based crops (i.e. if an obligated party exceeds the 2% limit, this credit of
energy cannot be carried to the following year);

• the excess credit carried into the following year can only be used to meet the biofuels obligation and
not the advanced biofuels obligation; and

• the excess credit carried from a given year cannot exceed 15% of the obligation for that year.

The treatment of carryover of energy from biofuels produced from used cooking oil and animal fats
will need to be examined in the context of the 1.7% limit (see above).

At the end of 2021 it is intended that obligated parties will be permitted to carryover certificates as
follows:

• a maximum of 15% of the certificates that a supplier was required to have in 2021 may be carried
into 2022; and

• each certificate will be credited with 30 MJ energy25.

(a) Do you consider the approach to carryover appropriate?

Yes, Calor agrees with the approach.

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Consultation Questions Relating to Compliance

Question 14
There has been a very high level of compliance with the Biofuels Obligation Scheme. This is ensured
through the requirement to pay a compliance fee (referred to as a ‘buy-out charge’ in legislation)
when an obligated party does not meet its obligation. Currently, the fee paid by obligated parties who
fail to meet the obligation is €0.45 for each certificate (equivalent to a litre of biofuel) below the
required level. This is equivalent to €0.015 per MJ of energy (assuming an average of 30 MJ per
litre/certificate as above). There have been very limited examples of this fee being paid to date due
to the high level of compliance.

The level of the fee has been set to ensure it is more cost effective for an obligated party to increase
the level of biofuels as opposed to paying the compliance fee. Given the future increases in the
obligation rate, the marginal cost of supplying more biofuel to the market is expected to increase. It
is therefore intended to increase the fee to €0.02 per MJ in 2022, €0.03 per MJ in 2025 and €0.04 in
2030.

The cost of supplying advanced biofuels is expected to be greater than that of other biofuels.
Accordingly, it is intended to see the fee for non-compliance with the advanced biofuel obligation to
be twice that for the biofuel obligation (i.e. two times the monetary levels set out

25 Based on a weighted average of 25% bioethanol (21 MJ/litre) and 75% biodiesel (33 MJ/litre) above
for each MJ of energy).

(a) Do you consider the approach to setting the level of compliance fee (or ‘buy out charge’) to be
appropriate?

Calor is not an obligated party. No comment.

Question 15
In the event of a significant oil/biofuel supply disruption, the requirements under the Biofuels
Obligation Scheme continue to apply. If such a disruption lasted for a prolonged period, it is possible
that obligated parties may not be able to meet the requirements of the scheme.

There is currently no scope for any adjustment to the Biofuels Obligation Scheme to take account of
such a situation. Fuel supplies would therefore be liable for compliance costs in not meeting the
obligation.

Therefore, there is some merit in providing the Minister scope to adjust the obligation under the
scheme in the exceptional circumstances. However, any such adjustment, while providing flexibility
to obligated parties, should not impact the overall obligations of the scheme.

It is therefore considered appropriate that the Minister may, in the event of a significant disruption
that prevents the supply of biofuels to the market, provide obligated parties flexibility in compliance.
This would be achieved by allowing obligated parties the option to make up for any shortfall in a
specified calendar year in the following calendar year in place of paying compliance costs.

(a) Do you consider the approach to dealing with a potential supply disruption appropriate?

Calor is not an obligated party. No comment.

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Consultation Questions Relating to Heat Sector

Question 16
The Biofuels Obligation Scheme is currently limited to the transport sector. In the heating sector, there
is a high use of fossil fuels, including oil and natural gas, which could potentially be blended with
renewable fuels to reduce emissions in the heat sector.

Responses to the previous consultation of the Biofuels Obligation Scheme highlighted a number of
technical challenges to using bioliquids in the heat sector (e.g. a large amount of oil used in the heat
sector is stored in tanks outside homes and businesses over long periods of time which may cause
issues).

Notwithstanding the input received to date, the introduction of such fuels in the heat sector can bring
significant decarbonisation benefits and therefore continues to be kept under consideration.

(a) What is your opinion on the potential for an obligation scheme (similar to the Biofuels Obligation
Scheme) in the heat sector?

Calor does not regard a renewable heat obligation as the optimum method to fund and deliver
Ireland’s 2030 renewable heat targets. Calor favours a consumer lead switch to renewables versus
an industry obligation. More focus should be given to removing existing barriers to the adoption of
renewable heat technologies, including addressing cost effectiveness for consumers.

The thermal heat sector already has a scheme in place called the Energy Efficiency Obligation Scheme
(EEOS). The obligation scheme started in 2014 and will run until at least 2020. It currently places
obligations on larger energy suppliers and distributors to deliver energy savings. This is true for all
energy types, including electricity, gas, oil and solid fuel. The purpose of this system is to reduce the
energy demand ultimately leading to a reduction in carbon footprint. If a biofuel obligation was also
put in place the same customer base, it would effectively increase cost for consumers to meet two
separate obligation schemes. We feel it unfair to burden our existing customer base with these
increased costs.

(b) What do you see as the technical barriers to introducing such a scheme?

(c) If a heat obligation scheme was to be introduced, what level of obligation (e.g. in percentage or
energy terms) would be appropriate?

Calor does not support the introduction of an obligation scheme for heat. However, if an obligation
scheme was put in place, a fair and levelised carbon target across all fossil fuels including, coal, peat,
oil, electricity and gas would be expected.

Clarity would be required on the proposed heat applications and heat users that would be included.
A key consideration would include the identification of heat users with the challenge of shared fuel
storage for transport, catering and heat (e.g. gasoline, electric, natural gas and LPG).

                                                    20

Consultation Questions Relating to Additional Input

Question 17
In addition to the specific questions asked in this consultation, your input is invited in relation to
the development of the Biofuels Obligation Scheme for the period 2021 to 2030 including the
implementation of the elements relating to renewable transport fuels in the recast Renewable
Energy Directive.

Calor remains available to provide input to the development of the BOS scheme and to outline in more
detail the supply pathways that it is developing and investing in to meet the needs of its LPG and LNG
consumers in the transport sector.

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To find out more about Calor, please visit
www.calorgas.ie